Consumer Affair Ministry To Curb Lose Functioning of E-Commerce Giants In India
According to new Indian e-commerce rules, company likes Amazon and Flipkart will be prevented from favoring a few of its smaller buyers and bypassing foreign rules.
Apparently, most e-commerce portals are not commenting on this development. However, according to Indian Ministry of Consumer Affairs, non-compliance with the new rules, if implemented, could be punishable with prison terms, and fines of at least 25,000 Indian rupees under India’s consumer law.
The new laws will definitely, raise costs for all online retailers but particularly Amazon and Walmart’s Flipkart as they may have to review their business structures, senior industry sources told media agencies.
Under the new rules, e-commerce portals will be limited to indulge in “flash sales”. This will rein-in a private label push, compelling them to appoint compliance officers and impose a “fallback liability” if a seller is negligent. Apparently, some e-commerce companies have been favoring some particular players over others. They have been using local subsidiaries to bypass import rules and cut down on costs.
According to a formal statement made by the Ministry of Consumer Affairs, “Certain e-commerce entities are engaging in limiting consumer choice by indulging in ‘back-to-back’ or ‘flash’ sales wherein one seller selling on the platform does not carry any inventory or order fulfillment capability but merely places a ‘flash or back-to-back order with another seller controlled by the platform. This prevents a level playing field and ultimately limits customer choice and increases prices.”
This has come to light as some Indian retailers allege that Amazon and Flipkart use their wholesale units to indirectly list products on their websites through select sellers, bypassing foreign investment restrictions that prohibit direct sales.
Some industry experts are seeing the rules in the industry as a government alternative to a more stringent version of its foreign investment law, which restricts business arrangements Flipkart or Amazon can have with sellers. There have been innumerable complaints to the Center from consumers, traders and associations against inescapable cheating and unfair trade mean practice in the e-commerce ecosystem.